Experian vs. CIBIL: Key Differences

Your credit score plays a crucial role in shaping your financial opportunities, from securing loans to getting better interest rates. But have you ever wondered which credit bureau impacts your score the most? When it comes to tracking and analyzing credit health in India, Experian and CIBIL are the two names that often come up. Let’s dive into their differences and see which one aligns better with your needs.

What is CIBIL?

CIBIL, short for Credit Information Bureau (India) Limited, is one of the most well-known credit bureaus in India. It provides credit scores and reports that reflect an individual’s credit history and financial behavior.

CIBIL collects information from banks, NBFCs, and other credit institutions about borrowers’ repayment patterns, existing loans, and credit usage. This data is then used to create credit reports and scores, which help lenders evaluate the creditworthiness of individuals or businesses.

What is Experian?

Experian Plc is a global credit information company operating in over 32 countries. It provides businesses with tools to manage credit risk, prevent fraud, and offer targeted marketing solutions. For individuals, Experian offers credit reports and scores while helping protect against identity theft.

In India, Experian is a recognized Credit Information Company (CIC), approved by the Securities and Exchange Board of India. Experian Credit Information Company of India Private Limited began its operations in November 2009.

Before Experian entered the Indian market, credit scores were already being provided by CICs like CIBIL, CARE, CRISIL, Equifax, SMERA Ratings, Brickwork Ratings and Fitch, many of which remain prominent today.

Difference between CIBIL and Experian

Let’s look at the factors that cause Experian and CIBIL scores to differ. These differences can arise due to:

Data Used:

Experian gathers data from a wide range of sources, including banks, financial institutions, credit card companies, utility bill payments, rental histories, and public records. This comprehensive approach helps create a more accurate profile of an individual’s financial behavior.

CIBIL, on the other hand, relies primarily on data from its member banks and financial institutions. Since its data sources are more limited, there may be gaps in a person’s financial information, which can affect the accuracy of their credit score.

Scoring Models:

The scoring models are another reason for the differences between Experian and CIBIL credit scores. Experian uses the FICO model, which considers factors like payment history, new credit, and credit mix. CIBIL’s scoring model is VantageScore 3.0, which is tailored to the Indian financial landscape.

Although both use their own proprietary models, the algorithms and calculations differ. These models are also updated to reflect changes in credit trends, economic conditions, and consumer behavior, which can lead to variations in scores.

Weightage Assigned to Factors:

Both Experian and CIBIL consider similar factors like credit payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries.

However, the weightage given to each factor differs between the two. One CIC might assign more importance to a specific factor, leading to variations in the credit scores. This also depends on the scoring models used by CIBIL and Experian.

Credit Ranges:

The range of credit scores of both Experian and CIBIL uses a range of 300 to 900.

Other Factors

Criteria	CIBIL	Experian
Geographical Presence	Operates solely within India	Available in over 32 countries worldwide
Market Popularity	The most widely used credit rating service in India, with 90% usage	The second most used CIC in India, after CIBIL
Official Recognition	Licensed by the Reserve Bank of India (RBI)	Recognized by the Securities and Exchange Board of India (SEBI)
Year Established	Founded in 2000	Established in 1996
Offline Report Delivery	Takes up to 7-15 days	Takes up to 15-20 days
Accessing Credit Score	Free credit score available on the CIBIL website	Free credit score available on the Experian website

How to Address Differences in the Credit Scores?

Here’s what you can do to resolve the discrepancies between your CIBIL and Experian scores:

1. Gather supporting documents like payment receipts, account statements, and any other relevant evidence. Be sure to keep copies of the original documents.
2. Notify the lender about the issue.
3. Follow the specific steps outlined by each credit bureau to raise your concern. CIBIL provides an online system under the Commercial Dispute Resolution, while Experian offers online, phone, and mail options.
4. Present your case by providing detailed information about yourself and the issue, along with the necessary document copies.
5. Follow up after a few days to check the progress of your complaint.
6. If you’re not happy with the outcome, you have the option to take legal action.

Important Factors Considered When Calculating the Credit Score

• Payment History: This is a key factor in determining your credit score. It shows if you’ve made timely payments on your bills. Missed payments, defaults, bankruptcies, or other negative marks can hurt your score significantly.
• Credit Utilization: This refers to the proportion of your credit card balances relative to your credit limits. If your balances are too high compared to your available credit, it can lower your score.
• Credit History Length: The longer your credit accounts have been open, the better it can reflect on your credit score. A long credit history typically has a positive effect.
• Credit Mix: Lenders prefer to see a variety of credit types in your history, as this shows how well you manage different financial responsibilities and handle credit.
• Recent Credit Activity: Opening too many new credit accounts in a short time can be seen as risky behavior. This includes both the number of new accounts opened and the frequency of recent credit checks.

Ways To Improve Credit Score

• Make Timely Payments: Always paying your bills on time is essential for maintaining a good credit score. Late payments can severely affect your score, so setting reminders or using automatic payments can help ensure you never miss a due date.
• Lower Credit Card Balances: Try to keep your credit card balances low in relation to your credit limits. High credit utilization can hurt your score, so paying down your balances can lead to a better score.
• Limit New Credit Applications: Applying for too many new credit accounts in a short time can appear risky to lenders. It’s best to limit new applications and credit inquiries.
• Maintain a Variety of Credit: Having different types of credit, such as credit cards, loans, and mortgages, can be beneficial for your credit score. However, only open new accounts when necessary and manageable.
• Keep Older Accounts Open: The length of your credit history affects your score, so keeping older, well-managed accounts open can have a positive impact on your credit.
• Resolve Outstanding Collections: If you have any accounts in collections, work towards resolving them by negotiating with creditors for a settlement or payment plan. Once resolved, it can improve your score.
• Consider Secured Credit Cards: If you’re having trouble qualifying for regular credit cards, a secured credit card can help. Making timely payments on it can improve your credit score.
• Talk to Your Creditors: If you’re facing financial difficulties, try negotiating with your creditors for better terms, such as lower interest rates or modified payment schedules.
• Review Your Credit Reports: Regularly check your credit reports to spot any mistakes or discrepancies that could affect your score.

Why is it Important To Have a Good Credit Score?

• Access to Credit: A high credit score opens up more opportunities to access credit. You’re more likely to be approved for credit cards and loans with higher limits and better terms.
• Better Negotiation Power: A solid credit score gives you the advantage when negotiating with lenders. You can use your strong credit to secure lower interest rates and reduced fees.
• Financial Flexibility: A good credit score offers financial flexibility. In case of emergencies or unexpected expenses, having access to credit can help cover costs without relying on expensive loan options.
• Building Wealth: With good credit, you can build wealth more efficiently. Lower interest rates on loans mean you’ll pay less over time, allowing you to save and invest more for the future.
• Credit Card Rewards and Perks: A strong credit score makes you eligible for attractive rewards and benefits. Responsible use of credit cards can earn you valuable perks and rewards.
• Eligibility for Special Offers: Many retailers offer special deals, like zero-interest financing for a set period. These offers are usually available to individuals with good credit.

Conclusion

Maintaining a good credit score is not just about borrowing capital; it’s a tool for greater financial freedom and security. With a solid score, you open doors to better loan terms, financial flexibility in emergencies, and opportunities to build for the future. Whether you’re looking to access credit, negotiate better rates, or qualify for special offers, a good credit score is your key to success.

At Kinara Capital, we understand how important financial flexibility is for small and medium businesses. That’s why we offer easy access to collateral-free business loans that help MSMEs grow and thrive. By ensuring timely payments, managing credit responsibly, and making informed financial decisions, you can pave the way for a stronger financial future, both personally and for your business.

FAQs

1. Which is better: Experian or CIBIL?

Both Experian and CIBIL are reliable credit bureaus, but their scores may vary due to different algorithms and data sources. CIBIL is more widely used in India, while Experian offers global presence and insights.

2. Is Experian credit score accurate?

Experian credit scores reflect your credit history based on reported data. However, accuracy depends on the information provided by lenders, so monitoring your report regularly for discrepancies is essential.

3. Which credit score is more commonly used in India, Experian or CIBIL?

In India, CIBIL scores are more commonly used than Experian. CIBIL is widely recognized and preferred by lenders, with around 90% of Indians relying on it for credit assessments and loan approvals.

4. How are Experian and CIBIL credit scores calculated?

Experian and CIBIL calculate credit scores based on payment history, credit utilization, credit age, credit mix, and recent credit activity. While both use similar factors, their algorithms and weightage assigned to each factor differ.

5. Can I check both my CIBIL and Experian scores for free?

Yes, you can check both your CIBIL and Experian credit scores for free once a year through their official websites. Additional reports or frequent checks may require a subscription or payment.